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. Last Updated: 07/27/2016

Insurers See Rating as Ticket to Growth

Russia's top insurance providers are touting a new ratings system as a way to boost their fledgling industry and bring it in line with Western practices.

The system, developed by ratings agency Expert Ra with the help of PricewaterhouseCoopers, will rank insurance companies based on financial performance and solvency, Expert Ra chief Dmitry Grishankov said Thursday.

Grishanov said that the method of rankings, which range from A1 for high financial stability to D for unsatisfactory solvency level, were adapted to "the peculiarities" of Russia.

"The sovereign rating of Russia is one of the lowest in the world, so Russian businesses within the scale of international agencies is invisible," he said.

Alexander Kamenetsky, board chairman of insurance major Voyenno-Strakhovaya Kompaniya, said that the new ratings will be a major step for Russian insurance companies toward the larger goal of getting an international rating.

"The Russian market has ripened and the insurance industry is enjoying unprecedented growth, but there is no information about it," said Eugene Reshetin, who authored the ratings system for Expert Ra.

"The industry has fully recovered from the [1998 finanicial crisis] and it generated 200 billion rubles ($6.9 billion) worth of business in 2000 and is now experiencing unprecedented growth," said Andrei Zhvirblis from the All-Russia Insurance Union.

"This rating will become very important in two years or less, when insurance companies will tap international capital markets," said Zhvirblis.

Zhvirblis said he expected the industry to grow at least 50 percent this year.

The first stage of the ratings will deal with just the five largest companies and be published at the end of next month, and Expert Ra said it plans to have the resources to rate "scores of companies" within a year.

The five companies — Voyenno-Strakhovaya Kompaniya, East-European insurance agency, RESO-Garantiya, Rosno and Progress have all signed on to the project.

Grishankov said while the average fee for international rating agencies is about $50,000, Expert RA is charging less than $2,000 — a discrepancy that he calls "one of those Russian peculiarities."

As part of the agreement, the companies pledge to provide a list of documents and the agency pledges confidentiality.

Kim Iskyan, an analyst at Renaissance Capital, said he would take a wait-and-see approach to the success of the ratings.

"The key problem is the quality of information that institutions provide to the agency and whether it is accurate and fair," he said. "The company might have a perfect method, but if the information is bad it is pointless and will produce bad results," he added.

Grishakov, however, said he was "surprised by the readiness of companies to disclose so much of information."

The president of Progress, Marat Aynetdinov, said that being financially forthcoming was necessary because ratings are necessary for growth and "transparency and ratings are interdependent things."